CHIPOTLE SEES $40M OF FREE BURRITOS AS CUSTOMER BAIT
You can’t deny the fact that people like free burritos, and right now, they really, really like free burritos — $40 million worth, in fact.
Chipotle Mexican Grill has been in full promo mode since February, when it began using coupons for free burritos and chips and salsa to woo back customers scared off by foodborne-illness outbreaks that rocked the booming fast-casual chain.
How are people responding to the free-food offers? Chief development officer Mark Crumpacker summed things up during Chipotle’s earnings call this week:
• Of the 5 million burrito coupons issued via a mobile offer, 67 percent were redeemed for 3.35 million free burritos.
• About 17.5 percent of the coupons mailed to households have been redeemed. By the time those coupons expire May 15, that figure should climb to 20 percent.
That adds up to more than $40 million in free burritos.
“We gave away 6 million entrees during the first quarter, and we did that intentionally,” chief financial officer John R. Hartung said during the earnings call. “We wanted to signal that the event was over.”
Chipotle’s operating costs were $155.2 million during the first quarter, up 36.7 percent from the same period last year. The company plans to spend even more on advertising during the second and third quarters, Hartung said.
As customers are weaned from free-food offers, Chipotle will offer follow-up promotions such as “Buy one, get one free.” New menu items such as chorizo — a spicy blend of chicken and pork — are planned.
Chipotle also hopes to bolster its mobile apps to reduce ordering, payment and pickup delays.
Still, the Denver company’s recovery will be slow, William Blair analyst Sharon Zackfia wrote in a research note Wednesday: “We believe plans to offer more personalized offers to encourage frequency could help further stimulate the recovery, although the best recovery tool may simply be time.
“Ultimately, we believe sales and margins can be recovered over the next two years and see the potential for dramatic stock appreciation from current levels for patient investors over the next 18 to 24 months.”